Dollar General Taking a Slice of Walmart’s Pie

Discussion
Jan 05, 2012

Dollar General is no Walmart killer, but according to a recent piece on Forbes.com, the chain’s focus on convenience and price is helping it grab share from its big box rival.

Mark Montagna, analyst at Avondale Partners, told Forbes that the average shopping trip in the dollar store takes only 10 minutes and his firm’s "pricing surveys revealed a market basket of goods at DG has a lower cost (nine percent) than Wal-Mart."

There’s no doubt that Dollar General is on a strong growth path. The company is moving into two new and large states, California and Massachusetts, in addition to the 38 where it already has a presence. The company plans to open 625 new locations this year, remodel another 550 and open a distribution center in California.

"Dollar General is excited about our tremendous opportunity for growth in existing markets as well as in new markets," said Rick Dreiling, Dollar General’s chairman and CEO, in a press release. "We believe the new communities and states we are entering will benefit from our stores’ convenience and value, as well as the jobs and commitment to community our stores bring."

Discussion Questions: Do Dollar General and other dollar store chains represent a challenge to Walmart’s growth prospects? What other big box chains do you see as susceptible to market share loss from Dollar General and others in the dollar channel?

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24 Comments on "Dollar General Taking a Slice of Walmart’s Pie"


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Richard J. George, Ph.D.
Guest
9 years 4 months ago

Absolutely. These extreme value formats are referred to as “ankle biters.” They are a pesky nuisance to Walmart, Target and others. At one time these were the only potential survivors when the traditional competitors to Walmart disappeared in the scorched earth when Walmart came to town.

Some would argue that Walmart losses to dollar store chains represent paper cuts. No one ever died from a paper cut but it is painful and if you receive enough of them you know they are for real.

These chains will continue to prosper as they add more food options. In fact, they have learned from Walmart’s success of using food as a traffic builder for the rest of the store. Remember, some people need to save money on food and necessities. However, everyone likes to save money on these items. Walmart should take these competitors very seriously.

Tony Orlando
Guest
9 years 4 months ago
I share a Dollar General right next to me, and to be honest, they are brutal to deal with. They will take a huge bite out of all the grocery categories in your store, and I have to change my thinking about how business is done here. Smaller packages on household goods, no service whatsoever, lots of pre-priced deals, and the buying power of the national chain, will hurt anyone they go near. It is a sign of the times for independents, as we continue to get the short end of the stick on procuring great deals on center-store goods. My dad told me long ago, that life ain’t fair so get over it, and recreate how you do business, and that has been my approach for years. Work the perimeter hard, and keep a nominal amount of dry goods at a good price to keep the whole store image. None of these dollar stores will ever have anything labor intensive, such as scratch deli-bakeries, or real meat cutters, as it is not their business… Read more »
Dick Seesel
Guest
9 years 4 months ago

Dollar General and other dollar stores continue to grow geographically and on a comp-store basis. It’s hard to connect the dots, however, to specific share gains at the expense of Walmart. There is no doubt that DG and its peers can nibble at the edges of Walmart’s business, in terms of opening-price commodity and food category. But the broad assortments and full-service groceries under one roof at a typical Walmart are tough to match in a small footprint. It would be worthwhile for Forbes to back up its contention with specific share data by market.

Ian Percy
Guest
9 years 4 months ago

We can only wait to see — but I sure hope so. I love these stores and dollar stores in general have turned into destination shopping experiences for our family.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
9 years 4 months ago
Dollar General is absolutely a threat to large discount stores like Walmart for several reasons. 1) Size of store – The Dollar store format is a fraction the size of a Walmart so they can more easily slip into a strip mall with low rent. It also provides them with several more options. Walmart needs a large space. 2) Employee cost – The Dollar store format allows a store to operate with minimal staff. When meeting with a competitor to Dollar General a few months ago they explained that the store is staffed with only 2-3 people keeping the cost far below a Walmart. 3) Flexible inventory – Unlike Walmart that needs to keep the shelves full with every item expected to be shopped by a consumer, Dollar stores have flexibility in this area where they can pounce on a great deal and hold back on other items that are not. A consumer generally needs to visit other stores to complete their shopping. Walmart has been aware of this growing competitor for years and has… Read more »
Charles P. Walsh
Guest
Charles P. Walsh
9 years 4 months ago
The dollar chains, including but most especially Dollar General, have been feasting on what Walmart left on the plate over the last 5 years. Under Walmart executive John Flemming’s failed policies Walmart antagonized its core customer base by gutting its assortments (Sporting Goods, Hardware, Crafts and Toys), cutting out whole businesses (Sewing)and raised its prices while moving away from EDLP and towards High Low Discounting. The customers who could no longer find what they needed at Walmart found what they needed at dollar stores (and others such as Lowes, Dicks) and became regular shoppers. Walmart’s customer counts and market baskets took a hit that they have yet to recover from. The dollar stores’ increasing sophistication in their product lines (wider assortments including pantry, better quality, packaging and branding)and their EDLP approach has helped to cement these formerly loyal Walmart shoppers and has become a critical mass leading to their continued growth. Walmart is working hard to regain these customers, however it may be difficult in light of the changes in shopping behaviors towards fewer stock… Read more »
Gene Hoffman
Guest
Gene Hoffman
9 years 4 months ago

A note to Walmart: “Watch out, Walmart! Those dollar store chains are acting like a pack of hungry hyenas. First one attacks from the front, then one attacks from the rear and another attacks from the side and each draws a little blood from their prey. Such attacks can be damaging and draw a lot of blood (sales). You better build a stronger defense system against those increasing low-priced predators.”

Any big box chain without distinguishable uniqueness or perceived everyday superiority will be susceptible to market share loss from persistent dollar store chains.

David Livingston
Guest
9 years 4 months ago

I don’t think Walmart or any successful retailer is losing sleep over dollar stores. You get what you pay for in those stores. There is a reason they are not high volume units and they have an inferior sales per square foot compared to other retailers.

Steve Montgomery
Guest
9 years 4 months ago

As has been pointed out, will a single dollar store win in a head to head with Walmart? No, but with their increasing number and emphasis on food they will continue to have an impact. Richard pointed out that paper cuts hurt, but I see this more in the “sand pebbles” arena – the death of a thousand cuts. No one cut will kill you but given enough of them you will definitely be hurting.

What the dollar store format does is provide those interested in this type of price focused shopping experience an alternative to Walmart when they only need a few things. Because of their numbers and quick in and out they also impact convenience retailers.

Paula Rosenblum
Guest
9 years 4 months ago

The dollar stores are the anti-big box retailer. I think they are what Walmart hoped its neighborhood markets would become.

It’s a fascinating strategy, and I expect they’ll take some share from supermarkets as well….it’s for any and all cherry pickers.

Joan Treistman
Guest
9 years 4 months ago

I love dollar stores. It’s a close second to my love for the Container Store. I don’t distinguish between Dollar General, Dollar Tree and the rest. As long as it’s a dollar store I’m in. It’s an adventure every time, whether I’m browsing or on a mission. Each store, even within one chain has its own inventory. In one store I’ve discovered Progresso soups for…you guessed it…a dollar. In most stores 100 index cards, envelopes, wrapping paper, arts and craft, wax paper, cleaning supplies…Will these purchases eat into what I buy elsewhere? Of course. But I won’t count on a dollar store to have what I want when I want it. For dependability I turn to the usual suspects.

Bill Bittner
Guest
Bill Bittner
9 years 4 months ago

I think this is exactly the competitor Walmart is targeting with their Walmart Express store concept. I have not seen an Express store, but as I remember our discussion last year it planned to be a limited line store offering online ordering and in-store pick up. This kind of ties into our future of retailing technology discussion the other day and the bright future projected for Amazon. Walmart seems to be coming to grips with the challenge of maintaining large outlets by beginning a transition to smaller footprints. I think this is a smart move.

Can Dollar General continue to nip at the corners? I have not compared assortments, but I think of Dollar General as more opportunistic. DG is more willing to sacrifice consistency for a good deal, thus causing greater brand turnover in the assortment. This would keep DG at a lower price point for consumers but it might also alienate some brand conscious consumers.

Ed Rosenbaum
Guest
9 years 4 months ago

Dollar General or any dollar chain will not hurt a Wal-Mart or Target by losing the occasional or infrequent shopper who wants to take a look at the Dollar store, especially if it is a once or twice occurrence. As weak as the service is at Wal-Mart, it far exceeds anything the best dollar store will ever offer.
The hurt is like Richard George put it so well. Those paper cuts hurt and if you get too many of them you have to do something about it. My guess is the dollar stores will become a major focus of the “big guys” and will become a battle ground. The winner? Those of us looking for the deep bargains. Imagine the depth of their financial pocket when they are opening or remodeling over a thousand stores this year alone.

Mark Burr
Guest
9 years 4 months ago
Its not just dollar stores, its all types of retail that represent a challenge to Walmart’s growth prospects. If it were not so, they would not be suffering from same store sales declines for so many successive quarters. Walmart is not “too big to fail”. They are in fact failing in many areas. Consumers are so much more willing to shop multiple stores to meet their needs than ever. Every little niche that has improved is having an effect on Walmart. Like so many big box stores (just as Best Buy discussed yesterday), there are more and more alternatives. The recession has challenged Walmart’s customer base to look. They have looked beyond Walmart and found alternatives. A dollar store isn’t the only one. I have read several articles recently about how even Walmart’s own “Price Drop” program hurt their image and had the unintended consequence of actually harming their perception of being the lowest price retailer. Thus, when you break perception just once, consumers begin to look. Also, so many retailers are willing to match… Read more »
Ben Ball
Guest
9 years 4 months ago

Of course they do. David Glass said so over 10 years ago. In fact, he called them Walmart’s “biggest threat”.

The dollar stores (DG/FD) are taking a chunk out of Walmart by offering greater convenience to the same shopper, with “convenience” defined by proximity and speed of in and out. They won’t replace Walmart’s major shop occasion as long as Walmart stays focused on low price — but they will take a large chunk out of the “fill-in” and “quick trips”. And that is a much larger chunk of Walmart’s business than most think.

Jeb Watts
Guest
Jeb Watts
9 years 4 months ago

My experience has been that Dollar General sells smaller units of a product for slightly less than Walmart sells a larger size of the same product.

Lee Peterson
Guest
9 years 4 months ago

Yes, dollar stores are taking a chunk of Walmart’s business, but they’re still not as much of a threat as Amazon is and will be. And oh by the way, Amazon is a threat to the dollar stores as well. Convenience? What’s more convenient than someone dropping it off at your door?

In retail today, the solution for growth is online, not more stores. The dollar stores are constantly talking about how many units they’re going to open. This mistake will come back to haunt them one day soon.

Matt Schmitt
Guest
9 years 4 months ago

In the past, Walmart made huge gains in market share by gaining a dominant position in small to mid size cities. More recently, it seems their focus shifted to suburbs and now to more urban positioning. Dollar General has been able to do really well in small towns, especially where Walmart does not see enough opportunity for their standard big box. If Walmart decides to go after them aggressively with smaller footprints, there could be quite a battle for the more rural areas.

In suburban and urban areas, there is a much more competitive environment. Again, Dollar General may be capitalizing on “quick and convenient” for a certain demographic. I believe Walgreens and CVS may be more of a direct threat to the dollar store growth prospects, based on convenience and locations and not as much on price.

Gene Detroyer
Guest
9 years 4 months ago

No, this is not a challenge to Walmart’s growth prospects. Walmart has already decided that the segment of the business defined by the conventional and Supercenter stores are saturated. Walmart does not look to this segment of the business for growth. Walmart will not defend market share in this segment and risk the bottom line. Or, they would be foolish to do so.

Walmart’s growth will be in channel (online and convenience stores) and globally.

Craig Sundstrom
Guest
9 years 4 months ago

This is so sad; when I think of all the communities that Walmart built and the time Sid-the-Manager opened the store in the middle of the night so Aunt Lulu could get her cough medicine…wait, sorry, wrong store: WM was built on 3 things — price, price and price — and now dollar stores have added a 4th…price. So to the extent that they (can) do that, then yes, they will succeed in taking market share. But at the moment U.S. retail seems to be a zero-sum game, and “success” for someone will imply loss of share for someone else.

David Zahn
Guest
9 years 4 months ago

I can echo Ben’s comments about Walmart viewing Dollar Stores as a threat. I sat next to Tom Coughlin at a meeting a number of years ago and heard him say the same thing then. In some ways, Dollar Stores mirror how Walmart began and they appeal to the same consumer/shopper with the same interests.

Verlin Youd
Guest
9 years 4 months ago
Dollar-format stores may not have been taken so seriously a few years back, but have become a serious force in the world of retail where they are now some of the largest distributors of some important categories, e.g. laundry products. Now with the addition of broader merchandise selection, while maintaining focus on high value and ease of shop, they become an even larger threat as consumers continue the search for best value. These retailers are succeeding by focusing on retailing fundamentals: – defining a market need and addressing that need directly. – providing a compelling combination of merchandise and price. – investing in strong retail personnel at all levels – using technology to support their specific business strategy and operating processes – all in support of their target customer. Rather than call them a threat to other retailers, I’d prefer to call them an opportunity for consumers who are looking for compelling value and convenient experience in staple home products categories. Anyone wanting to be competitive in those merchandise categories can not ignore the reality… Read more »
jeff fernandez
Guest
jeff fernandez
9 years 4 months ago

Not really. DG and other dollar stores have limited selection and cater to a different customer base. DG will take from within its own sector… Dollar Tree, Family Dollar, 99cents only, and Fred’s are the ones that need to watch closely whatever DG does. Walmart is not impacted at all.

Melanie Brannum
Guest
Melanie Brannum
9 years 4 months ago

My feelings on this is that people are basically going to shop where they want to. However, I do believe that the Dollar Market is stopping a lot of individuals from driving out of town to do their grocery shopping. I live in a small community and we were very glad to see the Dollar Market come to our town. I very seldom will drive out of town to do my shopping when I can not only save on gas but on food as well. I strongly believe that one day that Walmart will see a huge drop in their sales.

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